What are the different types of business loan?
Business loans are available in a number of formats – from unsecured loans and credit cards to secured loans and cash advances. Providing you can accurately forecast your finance and have a good credit history, most small business loans are relatively easy to access. However, for those with poor credit, there are still options.
If you’re new to business loans, it can be difficult to work out which type is most suitable for your business requirements. Read on for our guide to everything business loan related. And remember, whatever type of business funding you do require, Aurora Capital can search the market on your behalf. We’ll find the best deals, rewards, and rates, including start-up business loans from large, multi-national firms and independent finance houses too.
As the name suggests, these business loans do not require any collateral as a guarantee of payment. Instead, the credit provider takes the risk of granting credit without needing an asset to back up the loan.
To access an unsecured loan, you will most often need a good credit history both on the business and the personal side. We would also expect a business to be trading positively and making a profit for its most recent year.
This type of business loan allows your business to use an asset as collateral for business funding. This could be anything from land and buildings, to equipment and stocks. As lenders are given a guaranteed source of income if the business fails to make payment, secured loans have reduced interest rates compared to other types of business funding.
It’s also worth noting that businesses with a poor credit rating, or no financial history, can often still access secured loans. Sure, you’ll have to offset your loan against one of your assets, but if you’re confident you can repay, they’re a great way to access business credit – especially if you can’t access other forms of business funding.
Business Cash Advance
Business cash advances, often called PDQ or merchant cash advances, provide businesses with a lump sum payment that is repaid from your business’s credit and debit card takings. Put simply, an arranged percentage of your takings via card will be paid directly to your credit provider.
To access this type of business funding, you’ll need to show that a bulk of your sales come through card payments. The benefit of this type of small business loan is that you only repay when you earn. And as this is a form of unsecured business funding, you can use the loan for whatever best benefits your business.
This type of business loan is all about property. If you’re looking to renovate or refurbish one of your business premises, this is often the best choice. It’s also an incredibly popular business loan for property developers – even if you don’t have much experience.
This type of business funding is usually based on predictions of the expected value of the project when completed. It provides a quick and easy way to access necessary short-term cash injections for development costs and expenses.
Invoice finance is a type of business funding which provides loans related to the value of invoices for which your business has not yet received payment. You can usually access funding for up to 90% of this value – either on independent invoices or on your whole ledger. To access this kind of business funding, you’ll need to be receiving a steady number of invoices – usually around five per month.
Business Credit Cards
A form of unsecured loan, business credit cards are available for all business sizes. They’re especially popular with start-ups and SME’s, often providing interest-free rates for a business’s first year of trading. Using a corporate credit card sensibly can help you acquire higher levels of credit in the future. They’re also great for companies who need to account for staff spending, as you can often get more than one card per account. As they record all business purchases digitally, they’re great for simplifying tax returns at the end of the year.
Why choose Aurora Capital?
As funding specialists, we provide SME’s with business loans that are suited directly to their needs. As independent financial brokers, we have built up relationships with multiple lenders who can provide fast and flexible funding. This means we can offer a wide array of businesses with numerous benefits and competitive rates.
Finding the right funding is often a long-winded process, with plenty of variables to consider from all the different providers. Our finance experts can help, providing you with a list of the best deals and rates. Why not give us a call and talk through the different business funding options available. Call now on 01371 870 815.